QUESTION 1

1. Your company has not yet decided how it will apply LCM to its inventory. If management wants to maximize the value of ending inventory, it should:
2. apply LCM by item.
3. apply LCM by group, or "by class."
4. apply LCM to total inventory.
5. apply LCM using any one of the above methods because LCM does not affect the value of inventory.

2 points  

QUESTION 2

1. The net realizable value (NRV) of inventory is equal to its current replacement cost.
2.  True
3.  False

2 points  

QUESTION 3

1. Apogee Group purchases for resale 2,000 calculators for $16 each. At year end, the replacement cost is $15 each, the estimated selling price, $21, the disposal cost, $2, and the estimated markup, $4. If Apogee uses LCM costing, on a per-unit basis, what is the floor?
2. $17
3. $19
4. $16
5. $15
6. $21

2 points  

QUESTION 4

1. Applying LCM on December 31, 20X3, King Company determined that merchandise that originally cost $46,300 was worth $43,500 at market. Early in 20X4, the market value of King Company's inventory unexpectedly increased to $47,500. If the original credit to write-down the inventory in 20X3 was to the Inventory account, what should King Company do in early 20X4:
2. Make no entry and make no disclosure.
3. Make no entry, but disclose the loss in a note accompanying the financial statements.
4. Make an entry to recognize a $1,200 gain.
5. Make an entry to recognize a $2,800 recovery.
6. Make an entry to recognize a $4,000 recovery.